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SHOULD YOU INVEST OUTSIDE OF YOUR 401K?
Everywhere you turn you get the copy-and-paste financial advice that tells you to max out your 401k. While I don’t necessarily disagree with that I advise, I do think it’s very important that this isn’t where you put all of your savings.
In this message, I’m going to tell you why…
A new client reached out to me to review his 401k. He was debt-free and had done a great job saving almost $300,000 at 30 years old. He was excited because he had a plan to retire by 40. However, because all of his savings was in a 401k, there was no way that could happen. Here’s why…
If he continued to invest $14,000 per year, assuming an 8% annual return, after 10 years he’d have almost $900,000 by age 40, $866,714 to be exact. But, here’s the problem, because it was all in a 401k if he wanted to use it before age 59 1/2…
1) He would be penalized 10% for early withdrawal $86,671
2) He would lose more than 11% to state tax $97,954
3) He would lose almost 40% to federal tax $332,619
Leaving him with only $349,470 after 20 years of disciplined investing.
401k’s are designed for you to work until your in your sixties. So, if you want to start enjoying financial freedom before then you need to be investing outside of your 401k.
To help you get started, check out my free Guide titled $5, 5-minute Investing Plan. I break down how you can start investing in a diversified portfolio with as little as $5. Plus, it takes about 5 minutes to set up. Click here to download the free guide.
Thanks for taking the time to check out this video. God bless you on your financial journey.
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